MutualFundWire.com: Though Passive Dominates Advisor Flows, Active's Still Pulling in Ten of Billions

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Tuesday, January 31, 2017

Though Passive Dominates Advisor Flows, Active's Still Pulling in Ten of Billions

Passive continued to dominate advisor inflows last year, but active isn't down for the count just yet.

Frank Polefrone
Access Data
SVP of Product Development

Retail advisors (including discount brokerages and FAs affiliated with wirehouses, independent broker-dealers, and RIAs) net new passive assets rose 24.3 percent to $402.6 billion in 2016, per data from the Q4/year-end 2016 Fund Distribution Intelligence report just issued by Broadridge's Access Data unit. Yet retail FAs' net new active assets rose 2.1 percent to $88.9 billion. So nearly 82 percent of retail FAs' net new assets were in passive products, with the remaining 18 percent in active.

Institutional intermediaries (banks, private banks, and trust departments) were even more skewed to passive in 2016, but they still had net new active assets, too. Access Data estimates that institutional intermediaries put $208.1 billion (a 15.1-percent increase) in net new passive assets last year, compared to $24.3 billion (up 1.3 percent) in active.

"The move to lower fee products by fee based advisors and banks continues to drive the growth of passive products," states Frank Polefrone, senior vice president of data and analytics at Broadridge. "The shift is impacting both distributors and fund manufacturers, resulting in changes to distributor's product menus, development of new 'clean share classes' by active fund managers, and a broader use of ETFs for advisor managed portfolios."

"Fund firms with a wide selection of both active and passive products will continue to have success," Polefrone adds. "Active managers with unique products will also stand out and continue attracting assets."

All told, the Access Data folks estimate, intermediaries now have 36.3 percent of their assets in passive products, up from 32.6 percent at the end of 2015.

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